"It was fifty years ago today, Sgt. Pepper taught a band to play..."
Today, we're very close to Sgt. Pepper territory. At 7pm on January 4th, 1967, The Beatles returned to Abbey Road studios in London to do more work on a track begun during three sessions in December '66. Work on the track was finally completed on January 17th and it was released in the US and UK not long after. It was called Penny Lane.
The recording technique used on Penny Lane was different from anything the band had done before. Their usual way of working was to play the whole rhythm track through as a group, then, when they had a take they were happy with, they would start instrumental and vocal overdubs. In 1966, however, Paul MacCartney had fallen under the spell of Brian Wilson, the genius behind the Beach Boys and, specifically, 
behind MacCartney's favourite album of '66, 'Pet Sounds,' sometimes voted the most perfect album of all time. Macca took the album to the studio with him and used to listen to it during breaks. He told producer, George Martin, and the engineers at Abbey Road that he wanted the sound of that album, which he called, "the American sound." He meant a recording on which all of the instruments appear crisply in the mix, without the sort of fuzziness-producing 'bleed' that happened when recording several instruments at the same time. This presented technical difficulties since the tape machines at Abbey Road gave a maximum of four tracks. The answer was to fill those four tracks, then 'bounce them down' onto a single track on another four-track tape, fill the remaining three tracks on tape two, 'bounce down' again onto a single track, and repeat until the track was finished.
Paul wrote the song on piano, with John helping out on the lyrics for the third verse. This was appropriate since John had referred to Abbey Road in a first draft of his song, 'In My Life,' in 1965. Like Lennon's 'Strawberry Fields Forever,' recorded at the end of 1966, 'Penny Lane' was also a nostalgic trip through a Liverpool childhood and youth, full of references to actual places in or near the titular street. Both 'Strawberry Fields...' and 'Penny Lane' were originally planned to be part of the themed LP, 'Sergeant Pepper's Lonely Hearts Club Band.'
Paul's piano was the first instrument to be recorded at Abbey Road in December, followed by Paul overdubbing another piano part, this time played through a guitar amplifier, then a third piano, played in a lower key and at half speed then sped up to give another different sound quality. High notes from a harmonium were then added, along with some percussion.
During the session on January 4th, John overdubbed yet another piano part, George added some guitar, and Paul recorded his lead vocal. The session concluded at 2.45 am.
Subsequent sessions added one more piano part, this time played by George Martin, Paul's bass, John's rhythm guitar, Ringo's drums and hand bells, and John's congas. George Martin wrote arrangements for flutes, trumpets, piccolo, flugelhorn, oboes, cor Anglais), and bowed double bass, to be played by classical session musicians, as was the signature sound of the track, a solo for piccolo trumpet, played by David Mason of the English Chamber Orchestra. George's arrangements were basically transcribed from parts that MacCartney sang to him.
By the time recording sessions were finished on January 17th, both EMI in the UK and Capitol in the US were putting pressure on The Beatles' managment to come up with a new single. They hadn't released one since 'Yellow Submarine/Eleanor Rigby,' which had topped the charts in both countries in August the previous year. It was therefore decided to pull both 'Penny Lane' and 'Strawberry Fields Forever' from the planned 'Sgt. Pepper' LP. The downside is that these two themed tracks would have fitted really well in the scheme of the album. The upside is that 'Penny Lane/Strawberry Fields...' is widely regarded as one of the finest singles ever produced, perhaps the finest.
The Beatles were only one of many bands at the time competing with each other to be more creative, more imaginative. All were sharing tapes and ideas, all 
inspiring each other. During the recording of 'Penny Lane,' Paul McCartney and Ringo Starr took time out to go and see The Jimi Hendrix Experience play at the Bag O'Nails club in London. Macca's friend, Donovan, was riding high in the charts with 'Sunshine Superman,' the Kinks with 'Dead End Street,' the Who with 'Happy Jack,' and Cream with 'I Feel Free.' These were heady days, when artistic boundaries were expanding at an unprecedented rate in popular music. This fierce exploration, pushing towards a future that seemed overflowing with possibilities, was mingled with a nostalgia for the personal past and childhood, and for the social and sartorial past, from the late Victorian era through to the 1920s. These trends come together perfectly in The Beatles' paean of praise to the Liverpool of their youth and are perfectly captured in the promotional film (what we would now call a video) they made at the time. Enjoy ...
Blessings of peace, love and inspiration,
Greywolf